Best platforms to invest in art

Best platforms to invest in art

These days, there is no shortage of online investing platforms for assets — from stocks to real estate, to robo investing and cryptocurrency. Technology has also made it easy to invest in art, thanks to the number of online art investing platforms. Below are a few of the best platforms to invest in art, some of their pros and cons, and features to help you decide which is best for you.

Masterworks

Masterworks is one of the leading art investment platforms. Rather than investing directly in art, Masterworks allows you to invest in securitized blue-chip paintings. When you make an investment in Masterworks, you aren’t buying an entire piece of art. Instead, you’re buying a piece of ownership of a piece of art. As a result, you can easily build a diversified art portfolio for less money than the price of a single piece of art.

Once you’ve made your investment, you have two choices. You can either sell off your share of the piece. Or you can wait three to 10 years until Masterworks sells the piece, and each of the owners gets a pro-rata share of the proceeds. Keep in mind that liquidity on these investments may be lower than you’re used to, which will affect your ability to sell.

Masterworks is best for investors who want to gain art exposure to their portfolio, but without actually owning and maintaining pieces of art. It comes with plenty of benefits, including low investment minimums, an easy-to-use platform and solid historical returns. You can find out more in our Masterworks review.

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Pros

• Low investment minimums in high-priced art pieces
• Easy-to-use platform
• Historical returns higher than the S&P 500
• Available to non-accredited investors

Cons

• Low liquidity, since Masterworks doesn’t sell the art for three to 10 years
• 1.5% annual management fee and 20% commission
• Phone screening required before you can start investing

Yieldstreet

Yieldstreet is an alternative investment platform that allows investors to gain exposure to a variety of private markets that have previously only been available to institutional and high net worth investors. One of the investments available on Yieldstreet is art.

To invest in art through Yieldstreet, you can choose from six funds focused on fine art investments. Investors can get started with $10,000 and choose from a diversified pool of blue-chip, mid-career and emerging artists.

When you invest in art through Yieldstreet, you aren’t actually buying an individual piece of art. Instead, you’re investing in portfolios of backed loans and fractionalized shares of art. Depending on the offering you choose, you may get regular interest payments with principal repayment when the loan matures.

With the exception of one of Yieldstreet’s funds, keep in mind that the platform’s investments are only available to accredited investors — meaning those with an income of at least $200,000 (or at least $300,000 for a married couple), or a net worth of $1 million. You can learn more about the platform in our Yieldstreet review.

Pros

• Large variety of alternative asset offerings
• Easy-to-use platform
• Historical returns higher than the S&P 500

Cons

• High investment minimums
• Many investments are only for accredited investors

Otis

Otis is an online investing platform that democratizes access to alternative investments that have previously only been available to wealthy investors. It was created due to the founder’s passion for art and culture, and the belief that investing in cultural objects can be a part of any diversified investment portfolio.

With Otis, you can invest in many different types of alternative investments, including collectibles, art, non-fungible tokens (NFTs), sneakers, and more. Rather than directly purchasing the assets on Otis, you’re actually buying securitized versions of the assets that have been broken into many shares. You own just one piece of each asset, along with other investors. You can trade in real-time just as you would with stocks, and easily check in on your investments from the app.

There are two different ways you can make money on Otis. First, you can trade your shares to the different securitized assets. Second, Otis occasionally receives buyout offers for its assets. In that case, shareholders can vote on the offer, and each shareholder will get a pro-rata share of the proceeds. The good news is that Otis investments are available to both accredited and non-accredited investors.

Pros

• Available to non-accredited investors
• Low investment minimums for high-priced investments
• Make money either through trading or through buyout offers
• Offers more than just traditional art, including sneakers and NFTs

Cons

• Fees include 0-10% sourcing fee and 1% broker-dealer fee
• Potentially low liquidity
• Limited information available on investment returns

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Other ways to invest in art

Online platforms like Masterworks, Yieldstreet, and Otis have made it easier for the average investor to add art to their investment portfolio. However, these aren’t the only tactics available. Here are a few other ways to invest in art:

Art funds

Some investments are easy to purchase through a mutual fund or exchange-traded fund (ETF). These pooled investments allow you to own a part of many different assets, all through one investment. While there are no mutual funds or ETFs available for art, there are other art investment funds that allow you to gain exposure to this alternative asset.

When you participate in an art fund, you own a fractional portion of many different pieces of art. You don’t actually take control of the art, meaning you aren’t responsible for maintaining it or finding a buyer when the time comes. While these funds are small in number today, they may increase as securitized art investments become more popular.

Art indices

An art index tracks the sales and performance of various popular art pieces, similar to how an index fund tracks the performance of a particular stock index. And just as you can invest in stock index funds, it’s possible to invest in art indices that track these well-known art pieces.

It’s important to keep in mind, however, that art indices don’t work exactly like stock indices. After all, famous works of art don’t sell every day. And because the index only tracks the price when a piece of art sells, it can be inaccurate. After all, some investors hold onto pieces of art for years and even pass them down to heirs. You can see why this would make the numbers in these indices outdated.

Art galleries and auctions

Traditionally, art was purchased through galleries and auctions. And while there are now many online platforms to invest in art, the traditional route still works.

First, you can look for brick-and-mortar galleries in your area. Not only can you shop the items for sale at the gallery, but they may also offer services including tracking down specific pieces of art you’re interested in. It's a great way to support a local business and help jumpstart a new artist’s career, while also adding some well-known pieces to your portfolio.

Another way to shop is through online galleries and auction houses. These websites make it easy for anyone to buy and sell art. You can visit the website and search through hundreds of pieces available from other individual investors. When you’re ready to sell, these platforms also help to facilitate the deal (likely for a commission).

Keep in mind that buying art through a gallery or auction — especially when you’re talking about high-priced art — requires special knowledge of the industry. You wouldn’t want to spend hundreds of thousands of dollars on a piece without knowing exactly what you’re getting yourself into. Owning art also requires maintenance, which most investors aren’t interested in or used to.

For that reason, investors who want to add art exposure to their portfolios (without the research it takes to become well-versed in art) will likely prefer securitized investments and art indices, which take much of the guesswork and maintenance out of it.

Another downside of purchasing actual art pieces through a gallery or auction is the lack of liquidity. After all, selling an expensive painting is hardly the same as selling a stock. While one can be done online in just a few minutes, the other requires more planning, more effort, and potentially weeks (or months) or time.

The bottom line

Investing in art can be an excellent way to add some diversification to your portfolio. While it was once an investment primarily for high net worth investors, it’s now more readily available than ever, thanks to online platforms that have securitized art pieces for investors to purchase.

Remember that any time you invest in something, it’s important to do your research and understand how the investment fits into your financial goals, time horizon, and risk tolerance.